The lawsuit adds to Sutter's legal woes. California Attorney General Xavier Becerra sued the Sacramento-based system earlier this year, alleging it wielded its market heft in Northern California to charge higher prices.

Dive Brief

• The Department of Justice has intervened in a False Claims Act lawsuit against Sutter Health and its affiliate Palo Alto Medical Foundation alleging mischarges to Medicare Advantage plans.

• According to the complaint, filed in a federal court in northern California, Sutter manipulated diagnosis codes by inflating risk scores for MA plan beneficiaries, leading to higher payments. The suit also alleges that Sutter failed to take adequate steps to address the issue after learning of the unsupported diagnosis codes.

• The whistleblower lawsuit, United States ex rel. Ormsby v. Sutter Health, et al., was filed by Kathleen Ormsby, a former PAMF employee.

Dive Insight

MA has grown considerably over the last decade, with premiums totaling $202.7 billion in 2017, an increase from $69.9 billion in 2007. A total of 19 million beneficiaries enrolled in MA plans in 2017. As more payers and beneficiaries opt for the program, fraud investigators will be looking out for false and unsupported claims.

In a prepared statement, Alex Tse, the U.S. attorney for the Northern District of California said it was critically important the data submitted to the Medicare Advantage program was truthful, as the government depends on the information to set payment levels. "We will continue to guard government health programs from companies that improperly maximize their bottom line at taxpayer expense."

Under a proposed rule issued by the Centers for Medicare & Medicaid Services (CMS) in November, MA payers would be edited to confirm they are providing supported medical record documentation for what they claim they are owed. The government could save approximately $4.5 billion in recovered payments across the next 10 years through the plan for Risk adjustment Validation (RADV) audits, CMS officials said. The agency claims more than 8% of MA payments in fiscal 2017 were incorrect, including underpayments.

The lawsuit adds to Sutter's legal woes. California Attorney General Xavier Becerra sued the Sacramento-based system earlier this year, alleging it wielded its market heft in Northern California to charge higher prices. In response, Sutter subpoenaed pricing information from 50 hospitals in the state.